Monday, June 19, 2017

Plaintiffs alleged that they were misled by Kraft’s use of
the term “natural cheese” on its “Natural Cheese Fat Free Shredded Fat Free
Cheddar Cheese,” bringing the usual statutory California claims. The court previously
certified a California class. Here the
court partially decertifies the class but rejects Kraft’s challenge to
plaintiffs’ expert, who performed a conjoint analysis to try to determine the
incremental value to consumers of “natural.”

Dr. Anand V. Bodapati has been a Professor of Marketing at
the UCLA Anderson School of Management since 2000, teaching “Marketing,
Consumer Psychology, Consumer Behavior, and Statistical Methods for making
inferences from data on how consumers respond to product offerings, pricing,
advertising, and other marketing activity in the marketplace.” He surveyed California buyers of Kraft
shredded cheese, presenting them choices between images of (a) the marketplace
offerings of some leading manufacturers, (b) Kraft’s shredded fat free cheddar
cheese product as it was offered in the marketplace with the “natural cheese”
label, and/or (c) a digitally altered image identical to the Kraft image except
without the “natural cheese” label. Each respondent chose between options 14
times, with price differences between the products ranging from $0.80 to $4.50,
randomly assigned. The survey results
showed that 26% of consumers would pay more than $1 extra for a product with
the “natural cheese” label, and 12% would pay more than $2 extra for such a
product. Bodapati concluded that, on average, customers would be willing to pay
$0.747 more for a product with that label.

Kraft marshalled several experts in response. Key challenges: (1) Was the proper group
surveyed? Kraft argued that its fat free
cheese product was a niche product, so surveying all shredded cheese buyers was
inappropriate. The court found that this
didn’t justify exclusion. Bodapati explained
why he chose Kraft shredded cheese buyers—he didn’t have any reason to believe
that the value of “natural” would differ as between fat free and non-fat free
buyers, and he didn’t want to make the study more arduous. Also, some of the evidence Kraft cited indicated
that consumers varied—its category review indicated that fat content was only
the third most important factor cited by consumers, while the use they intended
and the form of the cheese were more important; the review also said that
“[c]onsumers buy more than one health segment for different uses, household
members and taste preferences.” Thus, the markets didn’t seem that distinct.

Kraft then argued that the survey was irrelevant because it
didn’t calculate damages. The survey
calculated the value to consumers, which was relevant to damages. Kraft contended that a price premium theory
was the only allowable model for false advertising damage, and conjoint
analysis couldn’t be used. The court disagreed. Dourts frequently admit evidence
based on a conjoint analysis.

Additional challenges to survey methodology could be
addressed on cross. Though the experts
disagreed about whether conjoint analysis could be used to compare products
with only one nonprice attribute, Bodapati testified that “having one attribute
only is good for the conjoint analysis in the sense that it reduces cognitive
overloading and thereby increases the fidelity of the decision making.” As for whether the survey telegraphed its
purpose to respondents, Bodapati explained that respondents’ attempts to pick
the “right” answer weren’t worrisome to him because, in conjoint analysis,
there is no “right” answer. He also testified that he elected not to show the
back of the packaging out of a concern for verisimilitude—how consumers
actually understand the products. And he
didn’t provide a none of the above option because, he said, conjoint analysis
works without that. These and other
criticisms went to weight, not admissibility.

Decertification: willingness to pay can measure restitution
damages, but under California law restitution is confined to restoration of any interest in
“money or property, real or personal, which may have been acquired by means of
such unfair competition.” But the conjoint analysis provided only evidence of
loss to the plaintiffs, not of gain to Kraft. While injunctive relief was still
possible, the court decertified the Rule 23(b)(3) class and sought additional
briefing on whether the class would be re-certifiable under Rule 23(b)(2). This
was possible because, under California law, deception and materiality need not
be proved as to every member of the class. Bodapati’s report and testimony showed
a triable issue as to materiality under the CLRA.

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